Microsoft Channel Chief: We Need To Get Better At Communicating Program Changes

Microsoft invests $2 billion annually in channel incentives, making it one of the most generous vendors in enterprise technology. But in January, many partners were up in arms after learning that Microsoft would be changing its Office 365 incentives in a way that would reduce their payments.

While Microsoft gave partners advance warning of the incentive changes on its partner portal, and through word-of-mouth, some partners felt blindsided by the changes.

This was one of the first big challenges for Phil Sorgen as corporate vice president of Microsoft's Worldwide Partner Group, a role he took over from Jon Roskill last August. And it's an experience he's planning to draw on in his efforts to improve Microsoft's communications with partners.

"We used vehicles we felt would reach the partner community. We learned that we need a megaphone larger than that when we announce changes," Sorgen told CRN in an interview in late February. "We have to consistently announce [channel program changes] as far out as we possibly can. Because if a single partner didn’t know, then there's a gap."

[Related: Microsoft Partners In Uproar Over Cloud Sales Commission Cuts ]

The January changes affected Microsoft's Advisor Enterprise Agreement Deploy program, in which partners advise customers to buy Office 365 and other cloud service subscriptions as part of EA volume licensing contracts, and get a one-time payment based on the full-year value of each customer seat at the time of deployment.

Advisor EA Deploy is an incentive that's paid to partners that may not actually transact the sale, but it can still be very lucrative. Which is why some were upset at learning their incentive payments would be dropping 40 percent to 50 percent.

Contrary to popular opinion in the channel, Microsoft did not change its incentive structure, according to Sorgen. Instead, Microsoft adjusted its "rate card," which is aligned to the SKU mix and average price points of products that partners are selling.

Sorgen said Advisor EA Deploy, and other channel incentives, are part of Microsoft's efforts to invest in cloud and make it a profitable business for partners.

"The most successful cloud partners are making significant money going beyond their project services, introducing repeatable [intellectual property], finding that the way they did business before may not be identical to how they do business in the future," Sorgen said. "Those are things we're trying to drive with our channel."

NEXT: Sorgen Says Transparency Is Key

With 640,000 partners worldwide, any changes Microsoft makes to its channel program are bound to cause ruffled feathers with some partners.

Sorgen told CRN that letting partners know what's coming in advance will give them time to digest the meaning of the changes.

"When you have an ecosystem as broad as ours, which covers many different partner business models and solution areas, any single decision could thrill one partner and potentially cause pain to another," Sorgen said. "We have to make sure we're transparent with our communications, and that we're always sharing the rationale for our decisions."

Chris Hertz, CEO of New Signature, a Washington, D.C.-based Microsoft partner who sits on the company's worldwide systems integrator partner engagement board, told CRN that Sorgen has done a good job in recognizing that partners with the same business models often see things from "wildly divergent" viewpoints.

"Phil faces a very difficult job on a daily basis balancing the many conflicting desires of an incredibly diverse partner ecosystem," Hertz said.

Sorgen, who has held field sales leadership positions throughout his 18-year career at Microsoft, said he has previously interacted with Microsoft channel partners in a number of ways, including as an account executive running SMB business in the U.S., as well as a regional global sales chief.

Going forward, Sorgen said his role will be to promote Microsoft's broader push into four key technology areas: social, mobility, big data and cloud computing.

"My No. 1 priority coming into this job was to start making sure the things we're doing are best positioning ourselves, and our partner ecosystem, to be successful in these areas," Sorgen said.

PUBLISHED MARCH 19, 2014